Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : HONG KONG -- Ignore unavailable to you. Want to Upgrade?

To: Ron Bower who wrote (1915)	6/17/1998 2:15:00 PM
From: MikeM54321	Read Replies (2) \| Respond to of 2951

Ron, Oh yeah. I've been following his posts. Very scary views and pretty bearish. Not that I'm saying they are wrong. I don't have an opinion on that. I don't recall Jess saying there was going to be intervention by the US though? That would have been a heck of a call after Rubin said it "would not work." I just posted an article on the Asia Forum site, pretty much expressing my current opinion of the intervention. I certainly wouldn't have said it this way, but here's the article. Remember it's not diplomatic at all! MikeM(From Florida) PS Yiwu, I was being sarcastic about my question regarding China's pressure on Clinton. Thank you for responding to it though. And thanks for the link of those economists opinions. Where are you dialing in from, if you don't mind me asking? ******************************************** David DeRosa: Pressure From China Likely Prompted the Intervention, By David DeRosa What's this? A big intervention in dollar/yen from the US Treasury! Several rounds of dollar selling (yen buying) as directed by the U.S. Treasury. And of course the Bank of Japan was in the market as well. Note that no European Central Bank participated. What ever happened to the man who told the Senate Finance Committee last week that intervention didn't work? You know, they guy who really gave it to Japan. That the problems go right to the heart of the Japanese inability to fix their broken economy. So what made Rubin change his mind? Direct intervention to sell dollars plus send Summers -- and the NY Fed's McDonough -- to Tokyo for emergency meetings with Japanese finance officials (including Mr. Yen). There are the conspiracy theories, as always. Pressure from the White House because the stock market tanked? We do know that the White House is confirming that Clinton spoke to Hashimoto last night. More likely it was pressure from China. All week the Chinese have been sending signals that they are desperate for some relief from the yen's collapse. No mistaking their direct threats to devalue the RMB. In the wake of those signals, there has been a lot of pressure on the stock markets all around the world, including the US market. Right now Clinton (always a fast study kind of guy) is putting out the word that he "approves" of the Chinese policy "against devaluation." Understanding Rubin is the key. I have a simple explanation. Rubin probably now sees his comments in front of the Senate Committee as having taken on a diabolical life of their own. Practically everyone saw it as a license to sell yen with no fear of loss. Then Rubin saw unmistakable signs of outright instability in world markets in the past several trading sessions. You would have to be pretty cavalier if you didn't at least consider the possibility these wild movements in world exchange rates and equity markets are signaling a possible systemic collapse. So what Rubin decided is to do a little gun boat diplomacy. Show the flag. Scare the traders out of their positions by putting the fear of intervention in them. And most of all, erase his comments that he made before the Senate Finance Committee that intervention didn't work (the remarks that sent dollar/yen at least six yen). But the problem of Japan still stands. And the terrible truth is that Summers and McDonough have to pull a very big rabbit out of their hats if they are to come back home with anything more than empty promises. Moreover, the Chinese aren't going to be happy campers when the effects of today's intervention eventually fade. We have Rubin's own words on that -- the effects are only temporary. How do you play this? First and foremost, don't get sucked in to short-term drama of the intervention. Be patient. There is a potentially enormous trading opportunity here. If you agree with me that Japan and the yen are toast, then keep your powder dry and wait. Intervention shocks usually cause the market to flutter around for a few days. Jump in now (long or short) and you will take on more risk than is warranted. There may be even a few more intervention forays in the next days. Then things will settle down. Japan will not fail to disappoint again. And the yen will begin to fall again. The risk of an Asian meltdown just went up -- not down -- because now we have had the famous intervention. When --not if -- it fails, the market will know that there is no way to fix the yen in the short-term. Or are you one of those people who believe that Hashimoto has seen the light and is going to bring forth new policies that will miraculously cure Japan? Right now Hashimoto is being quoted on the wires that he has a big new package that is surely going to do the trick. OK, hit us with it. If I am skeptical it's only because when it comes to hearing all about Japanese policy initiatives - now after 8 years of recession -- I have "been there, done that, and even got the shirt and hat." I say you will see 145 again.